Warner Bros Discovery Sets Stage For Potential Cable Deal By
Shares dive 13% after restructuring statement
Follows path taken by Comcast’s new spin-off business
*
Challenges seen in offering debt-laden direct TV networks
(New throughout, includes details, background, remarks from market insiders and experts, updates share prices)
By Dawn Chmielewski, Deborah Mary Sophia and Aditya Soni
Dec 12 (Reuters) – Warner Bros Discovery on Thursday chose to separate its declining cable TV businesses such as CNN from streaming and studio operations such as Max, preparing for a prospective sale or spinoff of its TV service as more cable television subscribers cut the cable.
Shares of Warner jumped after the company said the new structure would be more deal friendly and it anticipated to complete the split by the middle of 2025. Warner shares closed at $12.49, up more than 15%.
Media companies are considering alternatives for fading cable television organizations, a longtime golden goose where revenues are wearing down as millions of customers embrace streaming video.
Comcast last month revealed plans to divide the majority of its NBCUniversal cable networks into a new public business. The brand-new company would be well capitalized and placed to acquire other cable networks if the industry combines, one source told Reuters.
Bank of America research study analyst Jessica Reif Ehrlich wrote that Warner Bros Discovery’s cable assets are a “very logical partner” for Comcast’s brand-new spin-off business.
“We strongly think there is potential for fairly substantial synergies if WBD’s linear networks were combined with Comcast SpinCo,” composed Ehrlich, utilizing the market term for conventional television.
“Further, our company believe WBD’s standalone streaming and studio assets would be an appealing takeover target.”
Under the new structure for Warner Bros Discovery, the cable television service consisting of TNT, Animal Planet and CNN will be housed in a system called Global Linear Networks.
Streaming platforms Max and Discovery+ will be under a separate division together with film studios, including Warner Bros Pictures and New Line Cinema.
The an inflection point for the media industry, as investments in streaming services such as Warner Bros Discovery’s Max are finally settling.
“Streaming won as a behavior,” stated Jonathan Miller, president of digital media investment firm Integrated Media. “Now, it’s winning as a service.”
Brightcove CEO Marc DeBevoise stated Warner Bros Discovery’s new business structure will separate growing studio and streaming properties from rewarding but diminishing cable business, giving a clearer financial investment image and most likely setting the phase for a sale or spin-off of the cable system.
The media veteran and consultant forecasted Paramount and others may take a comparable path.
CEO David Zaslav, a veteran deal-maker who led Discovery through its acquisition of Scripps Networks Interactive before acquiring the even bigger target, AT&T’s WarnerMedia, is placing the company for its next chess relocation, composed MoffettNathanson expert Robert Fishman.
“The concern is not whether more pieces will be moved or knocked off the board, or if additional debt consolidation will happen– it is a matter of who is the purchaser and who is the seller,” wrote Fishman.
Zaslav signaled that circumstance throughout Warner Bros Discovery’s financier call last month. He stated he anticipated President-elect Donald Trump’s administration would be friendlier to deal-making, opening the door to media market debt consolidation.
Zaslav had taken part in merger talks with Paramount late last year, though an offer never ever materialized, according to a regulative filing last month.
Others injected a note of care, noting Warner Bros Discovery carries $40.4 billion in financial obligation.
“The structure modification would make it simpler for WBD to sell its linear TV networks,” eMarketer expert Ross Benes stated, referring to the cable organization. “However, discovering a purchaser will be challenging. The networks are in financial obligation and have no indications of growth.”
In August, Warner Bros Discovery wrote down the worth of its TV properties by over $9 billion due to uncertainty around costs from cable and satellite distributors and sports betting rights renewals.
Today, the media company announced a multi-year deal increasing the general charges Comcast will pay to distribute Warner Bros Discovery’s networks.
Warner Bros Discovery is wagering the Comcast agreement, together with a deal reached this year with cable and broadband company Charter, will be a design template for future negotiations with suppliers. That could help stabilize rates for the domestic pay TV market. (Reporting by Deborah Sophia and Aditya Soni in Bengaluru, Dawn Chmielewski in Los Angeles; Editing by Shilpi Majumdar, Arun Koyyur, Keith Weir and David Gregorio)
